Government Spending Review 2025: Economy shrinks as NHS spending surges and struggling councils miss out

The UK economy shrank by 0.3 per cent in April - the biggest monthly fall in 18 months. The drop, which is much worse than expected, is a blow to Chancellor Rachel Reeves. She admitted the figures were “clearly disappointing” but stood by her growth plan. Reeves says the Government's “investing in Britain’s renewal” to help working people.

However, one think tank has warned Britain is morphing into a “National Health State". It follows the spending review, which gave the NHS a £29 billion boost.

The Resolution Foundation says health now completely dominates public service spending. And by 2030, half of all such spending could go to the NHS.

“Lack of investment” in councils: More Business in Brief

• Meanwhile, the chancellor is also facing criticism for a “lack of investment” in English councils. MPs warned the spending review fails struggling local authorities, including near-bankrupt ones. The Treasury plans to boost council funding by £3.4 billion a year by 2028. But critics say next year’s real-terms rise is just 1.1 per cent - which is not enough to meet demand.

• UK house prices have soared by 74 per cent in two decades, adding more than £150,000 to the average home. Zoopla says values rose from £113,900 to £268,200 - pricing many out of their hometowns. London saw the biggest jump, with prices more than doubling. But growth was far slower in places like Blackpool and Sunderland.

• Tesco has reported stronger sales, despite fierce competition in the UK grocery market. Group sales rose 4.6 per cent to £16.4 billion in the 13 weeks to May 24. The supermarket says its price cuts helped attract more shoppers.